Wynn Palace and Wynn Macau combined to blow expectations out of the water by posting $293 million in property EBITDA for the quarter – 16 percent above the Wall Street consensus of $254 million.
And all that came in spite of lofty estimates – monthly gross gaming revenue has seen an uptick – and significant disruptions and property access issues at Wynn Palace, which opened last August on the Cotai Strip but has been grappling various blockades due to a light rail and construction projects at nearby MGM and SJM properties.
“Business is good for us,” said Steve Wynn, chief executive of Wynn Resorts, on a conference call Tuesday. “We’ve been enjoying a resurgence of activity at the top-end in China. We’re enjoying the continuing prosperity of Wynn Macau and the steady growth of Wynn Palace pursuant to plans and the expectations we’ve had since the inception of that project.”
After feeling the squeeze of an anti-corruption drive by the Chinese government for several years that, Wynn said that the Chinese VIP customer is back in play. Further, he proclaimed that access to the Chinese market remains a “precious asset.”
“The suppression of the VIP market was something that was the result organically of a process that the administration of President Xi Jinping thought was appropriate for the country, the elimination of corruption,” he said. “But having made a corrective move in China there comes a point when the corrective move, it sort of finishes.”
“And although corruption is still a major item in the [People’s Republic of China], the initial impact has softened,” Wynn continued. “And so people begin to return to normal spending habits, and they are not so strongly influenced by public policy issues that involve public officials. So the people are settling back into routines that they’re comfortable with, and that includes going to Macau and buying a new car or shopping at Louis Vuitton.”
As these macro consumer trends continue to reverse, Wynn said that he doesn’t expect any further interference from mainland China or Macau governmental bodies, and added that they’ve been actually highly cooperative.
“We do not see any negative impact by central government or Macau government activity. [As a] matter of fact we see quite the opposite – support and encouragement,” he said.
Several Wall Street analysts concur with Wynn’s view and see Macau – particularly the VIP segment – as entering rebound mode.
“Management commented they are seeing players return to the properties they had been staying away from due to ongoing political pressures in the region, and also noted it appears that junkets are going through some mild reinvigoration. We believe these are tangible positives, corroborated by our property checks,” said Chad Beynon, an analyst with Macquarie, in a note.
“We have become incrementally more bullish (i.e. comfortable) with the sustainability of ongoing VIP trends over recent weeks. Management reinforced this view with the return of familiar VIP customers, growing junkets, and, more importantly, return to previous behavior on the part of customers,” wrote Grant Govertsen of Union Gaming.
“Judging from management’s commentary on the call regarding what it believes to be a sustainable VIP recovery, further supported by improved liquidity in the junket system and an expectation for several new junkets to go live at Wynn’s properties over the next few weeks, we do not expect the outsized VIP-driven growth story to abate any time soon,” said Steven M. Wieczynski of Stifel.
Both Las Vegas Sands and MGM Resorts are slated to report earnings this week and offer the industry a more comprehensive picture of what the Macau recovery truly entails.
